US private equity rivals join forces in Morrison’s hunt on investors’ hopes of a bidding war
Investors hoping for a bidding war over Morrisons were disappointed yesterday when a US private equity firm pulled out of the race and joined a rival.
Apollo Global Management itself ruled out a bid for the grocer, revealing that it is in talks to join the existing £6.3bn offer led by Fortress Investment Group.
The company’s earlier announcement that it was considering an approach helped propel Morrisons shares to a high of 267.8p this month as investors anticipated a showdown.
Apollo Global Management revealed it is in talks to join Fortress Investment Group’s £6.3bn bid for Morrisons – which is led by CEO David Potts (pictured)
But analysts said Apollo’s latest move made it more likely that the fort’s bid would now succeed. Shares of Morrisons fell 0.3 percent, or 0.9p, to 261.1p as investors reacted to the news yesterday.
But that remained above Fortress and its consortium’s bid of 254 pence per share – suggesting shareholders believe a higher offer could still materialize.
Fellow US private equity firm Clayton, Dubilier & Rice, whose £5.5 billion bid was rejected last month, is considering a second approach, with analysts thinking Amazon is another potential candidate.
But Apollo confirmed yesterday that it is in “the preparatory phase of talks, which could lead to Apollo becoming part of the investment group led by Fortress.”
A spokesman for the takeover firm said: “As a result of these discussions, Apollo does not intend to make an offer for Morrisons other than as part of Fortress’ offer.”
Apollo also promised support for Fortress commitments on jobs, pensions and the supply chain at Morrisons – which is led by CEO David Potts (pictured) – including a pledge not to sell “material” amounts of property – although these are not legally binding.
Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, said: “Apollo is laying down his arms and may be joining forces with the Fortress-led syndicate.
This is disappointing from a shareholder perspective. There could be other weapons in the bidding hall, but for now Morrisons is again courting a single suitor.’
However, a top 20 shareholder indicated yesterday that the takeover battle is far from over. “My view is still that 254p significantly undervalues Morrisons,” the investor said.
CD&R is currently considering making another offer. The Morrisons share price has barely changed today and is still 10 pence above the Fortress offering.’
Still, Apollo’s move means that attention will now turn to whether top Morrisons investors — many of whom have kept their mouths shut while bid speculation has escalated — will support the Fortress acquisition.
The sale is far from a closed deal, requiring 75 percent approval in a shareholder vote.
Number one shareholder Silchester, who owns 15.2 percent of Morrisons, has yet to disclose a position and is expected to play the kingmaker role.
Along with the second-largest shareholder Blackrock, who owns 9.9 percent and is also undisclosed, Silchester has enough votes to block the Fortress deal.
And others have criticized the takeover, with MPs from across the political spectrum calling on the government to step in and scrutinize its impact on jobs and the supply chain.
Top ten investor Legal & General Investment Management urged Morrisons’ board to release more information about his assets and warned of a takeover “for all the wrong reasons”.
Andrew Koch, senior fund manager at L&G, said the bidding process had raised “more questions than answers” for Morrisons and that he was concerned that the supermarket’s assets could be sold by its private equity buyers in an attempt to boost profits. enlarge.
Dbay softens offer for Telit
Private equity firm Dbay has stepped up its bid for Telit Communications after shareholders threatened to derail the deal.
Dbay had initially agreed with Telit’s board to pay 220 pence per share for the technology company, worth £306.9 million.
But the Isle of Man-based private equity firm announced yesterday that it would raise its offer to 229.5 pence, bringing the total to £320 million.
The move was driven by discontent among shareholders, especially hedge funds that had piled up after Dbay’s initial bid in hopes of squeezing more money out of the deal.